What is balance transfer APR?

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In a Nutshell

An introductory balance transfer APR offer can give you time to pay down credit card debt with lower interest. Here’s how an intro balance transfer APR offer may be able to save you money.
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A balance transfer APR is the interest rate you’ll pay on balances you transfer to a credit card.

Some cards come with an introductory balance transfer APR offer that you get when you transfer credit card debt to their card from an existing credit card.

This temporary promotional rate may give you a way to reduce or pay off credit card debt at a lower interest rate, sometimes even as low as 0%. Once the intro balance transfer APR offer is over, a new and ongoing APR will apply and you’ll be charged interest. This new APR is also known as the “regular balance transfer APR.”

Transferring balances to a card with an introductory balance transfer APR could potentially save you hundreds of dollars in interest. Here are some things to know about how regular and intro balance transfer APRs work and how an intro APR may be able to help you pay off credit card debt sooner.

How does a balance transfer APR work?

Credit card companies charge interest according to your annual percentage rate, or APR, on the card. This determines the amount of interest you’ll pay monthly to carry a balance. There are generally multiple APRs on a credit card that apply in different situations; balance transfer APR is one type of APR.

A balance transfer APR is the interest rate you’ll pay on balances that you transfer to your credit card. Many credit cards offer an introductory APR on balance transfers, a low-interest or 0% rate that stays in effect for a set time period, which ranges from six months to 21 months or more, depending on the card issuer.

So how much can you save on interest with a 0% intro balance transfer APR? A lot.

Let’s say you have a balance of $6,000 with a 19% balance transfer APR on Card A. If you make monthly payments of $386, you could pay the balance off in about 18 months. However, you’d also pay around $941 in interest.

On the other hand, if you transfer the $6,000 balance to a hypothetical new card that has an introductory balance transfer APR of 0% for 18 months and no balance transfer fee, you could make lower monthly payments of $334 and still pay off the balance in 18 months. This balance transfer can save you about $940 in interest that you would’ve paid with Card A.

3 things to know about intro balance transfer APRs

There are a few factors you should be aware of before you apply for a credit card with an intro balance transfer APR offer.

1. Length of the intro APR offer

Once the intro balance transfer APR expires, a higher interest rate — the regular balance transfer APR — typically kicks in.

Before you apply, you should read the card’s terms and conditions to find out which APR will eventually replace the promotional rate. Credit card companies must tell you how long the introductory rate will last and which APR applies after the intro period ends.

2. Different APRs for different things

Your balance transfer card will likely have various APRs, such as an APR for new purchases versus balance transfers. You could wind up paying more interest than you expected if you make purchases on a card that doesn’t also have an intro APR offer for new purchases.

And even if the new card has a 0% intro APR for new purchases as well, be careful not to make too many new charges while paying off the transferred balance to avoid building up more debt. You’ll want to pay off the transferred balance during the specified intro period because the regular balance transfer APR will apply to your remaining balance.

3. You can lose an intro balance transfer APR offer

Credit card issuers have to keep the introductory rate in effect for at least six months, but they can still cancel the intro APR before that if you’re more than 60 days late on a payment.

4. Your total transfer amount generally can’t exceed your credit limit on the card

The total transfer amount will typically include any fees, such as the balance transfer fee. Some issuers place a cap on the amount you can transfer. Check out the card’s terms and conditions to learn about potential restrictions on balance transfers.

Bottom line

Before you apply for a card with an intro balance transfer APR, read the offer’s terms and conditions closely for fees, the regular balance transfer APR that follows the introductory rate, and how long the intro balance transfer APR stays in effect.

It can be complicated, but with the right offer, it could be worth it. With balance transfer credit cards, you can potentially save hundreds of dollars in interest, stop juggling multiple due dates from other credit cards and get serious about knocking down your credit card debt.

About the author: Deb Hipp is a freelance writer with a bachelor’s degree in English and creative writing from the University of Missouri-Kansas City. When she’s not writing about personal finance and news, she enjoys traveling to seas… Read more.